No. L-18994.

 June 29, 1963.

MELECIO R. DOMINGO, as Commissioner of Internal Revenue, petitioner  vs.  HON.

LORENZO C. GARLITOS, in his capacity as Judge of the Court of f First Instance of
Leyte, and SIMEONA K. PRICE, as Administratrix of the Intestate Estate of the late
Walter Scott Price, respondents.

Taxation; Inheritance tax; Procedure in enforcement against estate of deceased person; Claim

must be filed before probate court.—The ordinary procedure by which to settle claims or
indebtedness against the estate of a deceased person, as an inheritance tax, is for the claimant to
present a claim before the probate court sa that said court may order the administrator to pay the
amount hereof (Aldamiz vs. Judge of the Court of First Instance of Mindoro, L-2360, Dec. 29,
1949).
Same; Same; Same; Same; Legal basis.—The legal basis for such a procedure is the fact that
in the testate or intestate proceedings to settle the estate of a deceased person, the properties
belonging to the estate are under the jurisdiction of the court and such jurisdiction continues until
said properties havebeen distributed among the heirs entitled thereto. During the pendency of the
proceedings all the estate is in custodia Iegis and the proper procedure is not to allow the sheriff.
in case of a court judgment, to seize the properties but to ask the court for an order to require the
administrator to pay the amount due from the estate and required to be paid.
Same; Same; Compensation between taxes and claims of intestate recognized and appropriated
for by law.—The fact that the court having jurisdiction of the estate had found that the claim of
the estate against the Government has been appropriated for the purpose by a corresponding law
(Rep. Act No. 2700) shows that both the claim of the Government for inheritance taxes and the
claim of the intestate for services rendered have

444

444 SUPREME COURT REPORTS

ANNOTATED

Domingo vs. Garlitos

already become overdue and demandable as well as fully liquidated. Compensation, therefore,
takes place by operation of law, in accordance with the provisions of Articles 1279 and 1290 of the
Civil Code, and both debts are extinguished to the concurrent amount.

ORIGINAL PETITION in the Supreme Court. Certiorari and mandamus.

The facts are stated in the opinion of the Court.
     Solicitor General and Atty. G. H. Mantolino for petitioner.
     Benedicto & Martinez for respondents.

LABRADOR, J.:
This is a petition for certiorari and mandamus against the Judge of the Court of First
Instance of Leyte, Hon. Lorenzo C. Garlitos, presiding, seeking to annul certain orders of
the court and for an order in this Court directing the respondent court below to execute
the judgment in favor of the Government against the estate of Walter Scott Price for
internal revenue taxes.
It appears that in  Melecio R. Domingo vs. Hon. Judge S. C. Moscoso,  G.R. No. L-
14674, January 30, 1960, this Court declared as final and executory the order for the
payment by the estate of the estate and inheritance taxes, charges and penalties,
amounting to P40,058.55, issued by the Court of First Instance of Leyte in special
proceedings No. 14 entitled "In the matter of the Intestate Estate of the Late Walter
Scott Price." In order to enforce the claims against the estate the fiscal presented a
petition dated June 21, 1961, to the court below for the execution of the judgment. The
petition was, however, denied by the court which held that the execution is not
justifiable as the Government is indebted to the estate under administration in the
amount of P262,200. The orders of the court below dated August 20, 1960 and
September 28, 1960, respectively, are as follows:
"Atty. Benedicto submitted a copy of the contract between Mrs. Simeona K. Price, Administratrix
of the estate of her late husband Walter Scott Price and Director Zoilo Castrillo of the Bureau of
Lands dated September 19, 1956 and acknowledged before Notary Public Salvador V. Esguerra,
legal adviser in Ma

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VOL. 8. JUNE 29, 1963 445

Domingo vs. Garlitos

lacañang to Executive Secretary De Leon dated December 14, 1956, the note of His Excellency,
Pres. Carlos P. Garcia, to Director Castrillo dated August 2, 1958, directing the latter to
pay to Mrs. Price the sum of P368,140.00, and an extract of page 765 of Republic Act No. 2700
appropriating the sum of P262. 200.00 for the payment to the Leyte Cadastral Survey, Inc.,
represented by the administratrix Simeona K. Price, as directed in the above note of the
President. Considering these facts, the Court orders that the payment of inheritance taxes in the
sum of P40,058.55 due the Collector of Internal Revenue as ordered paid by this Court on July 5,
1960 in accordance with the order of the Supreme Court promulgated July 30, 1960 in G.R. No. L-
14674, be deducted from from the amount of P262.200.00 due and payable to the administratrix
Simeona K. Price, in this estate, the balance to be paid by the Government to her without further
delay." (Order of August 20, 1960)
"The Court has nothing further to add to its order dated August 20. 1960 and it orders that the
payment of the claim of the Collector of Internal Revenue be deferred until the Government shall
have paid its accounts to the administratrix herein amounting to P262.200.00. It may not be
amiss to repeat that it is only fair for the Government. as a debtor, to pay its accounts to its
citizens-creditors before it can insist in the prompt payment of the 'latter's account to it, specially
taking into consideration that the amount due the Government draws interests while the credit
due to the present estate does not accrue any interest." (Order of September 28. 1960)

The petition to set aside the above orders of the court below and for the execution of the
claim of the Government against the estate must be denied for lack of merit. The
ordinary procedure by which to settle claims of indebtedness against the estate of a
deceased person, as an inheritance tax, is for the claimant to present a claim before the
probate court so that said court may order the administrator to pay the amount thereof.
To such effect is the decision of this Court in Aldamiz vs. Judge of the Court of First
Instance of Mindoro. G.R. R No L-2360. Dec. 20. 1919, thus:
"x x x a writ of execution is not the proper procedure allowed by the Rules of Court for the
payment of debts and expenses of administration. The proper procedure is for the court to order
the sale of personal estate or the sale or mortgage of real property of the deceased and all debts or
expenses of administration should be paid out of the proceeds of the sale 01- mortgage The order
for the sale or mortgage should be issued upon motion of the administrator and with the
written notice to all the heirs.

446

446 SUPREME COURT REPORTS ANNOTATED

Domingo vs. Garlitos

legatees and devisees residing in the Philippines, according to Rule 89, section 3, and Rule 90,
section 2. And when sale  ormortgage of real estate is to be made, the regulations contained in
Rule 90, section 7, should be complied with.
"Execution may issue only where the devisees, legatees or heirs have entered into possession of
their respective portions in the estate prior to settlement and payment of the debts and expenses
of administration and it is later ascertained that there are such debts and expenses to be paid, in
which case 'the court having jurisdiction of the estate may, by order for that purpose, after
hearing, settle the amount of their several liabilities, and order how much and in what manner
each person shall contribute, and may issue execution if circumstances require' (Rule 89, section
6; see also Rule 74, section 4: Italics ours.) And this is not the instant case."

The legal basis for such a procedure is the fact that in the testate or intestate
proceedings to settle the estate of a deceased person, the properties belonging to the
estate are under the jurisdiction of the court and such. jurisdiction continues until said
properties have been distributed among the heirs entitled thereto. During the pendency
of the proceedings all the estate is in custodia, legis and the proper procedure is not to
allow the sheriff, in case of a court judgment, to seize the properties but to ask the court
for an order to require the administrator to pay the amount due from the estate and
required to be paid.
Another ground for denying the petition of the provincial fiscal is the fact that the
court having jurisdiction of the estate had found that the claim of the estate against the
Government has been recognized and an amount of P262,200 has already been
appropriated for the purpose by a corresponding law (Rep. Act No. 2700). Under the
above circumstances, both the claim of the Government for inheritance taxes and the
claim of the intestate for services rendered have already become overdue and
demandable as well as fully liquidated. Compensation, therefore, takes place by
operation of law, in accordance with the provisions of Articles 1279 and 1290 of the Civil
Code, and both debts are extinguished to the concurrent amount, thus:
"ART. 1200. When all the requisites mentioned in article 1279 are present, compensation takes
effect by operation of law, and extinguishes both debts to the concurrent amount, even
 447

VOL. 8, JULY 26, 1963 447

Luzon Stevedoring Company, Inc. vs. Court of
Industrial Relations

though the creditors and debtors are not aware of the compensation."

It is clear, therefore, that the petitioner has no clear right to execute the judgment for
taxes against the estate of the deceased Walter Scott Price. Furthermore, the petition
for certiorari and mandamus is not the proper remedy for the petitioner. Appeal is the
remedy.
The petition is, therefore, dismissed, without costs.

          Padilla,  Bautista
Angelo, Concepcion, Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.
     Bengzon, C.J., took no part.
     Reyes, J.B.L., J., concurs in the result

Petition dismissed.

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